♪ francine: markets beware, a near hawkish turn welker wrote a signals there is more easing to come. rise.d gold we year from the head of chatham house. he is robin niblett. and the first day on the job, the enormity of the task ahead. this is bloomberg "surveillance." i am francine lacqua in london. tom keene is in new york. we had better than expected

german figures. italy is in line. the gdp portion, it is more important what mario draghi is looking at. tom: absolutely. you see the economy growing less in the initial estimate, which gets back to the carney announcement yesterday of a lower forecast from britain. you wonder where the dynamic is, where a economies will pick up in 2016. i have not seen it yet other than the one german item this morning. belowne: a touch estimates. the real question, how much does it have to do with a weaker euro, and how much does it have to do with real growth spurred by economic reform? let's get to the first word news. nejra: you have the numbers from the euro zone as a whole. germany's economy grew at the fastest rate in two years . gdp rose7/10 tense of a percent beating estimates.

thoughfset record unemployment in germany which has boosted consumer spending. a report says the european union's naval operation to stop people smugglers in the mediterranean isn't working. lawmakers in the house of lords says disrupting the migrant business is falling short. succeeding in rescuing refugees on the high seas. in syria, the hezbollah military group has suffered a blow. one of its senior commanders has been killed. in charge of hezbollah's military operations in syria. according to a lebanese report he was killed by an israeli airstrike. personal information on chinese communist party leader has been leaked on twitter. among them jack ma and wang jin

lin.many of the tweets were quickly it in investigating donald trump's former butler for making threats against president obama online. facebook, he called for the president to be killed. campaign disavows the remarks. global news, 24-hours a day, powered by our 2400 journalists, in 150 news bureaus around the world. i am nejra cehic. tom: what a strange week. let's go through it. equities, bonds, currencies, futures negative eight. turned, dollar is stronger, not a big deal. two-year, the german -5.5 on the bloomberg. that is what i'm watching. the german two-year.

the curve is flattening in the united states of america. francine: curve flattening. going back to the german two-year, looking at japan. i want to show you the yen. what is important is that we had fed speakers saying the markets the ratepricing in hike. corrode it is signaling divergence, but it is not being played out on the markets so much. cold is a touch, but nothing to write home about when you have central bankers saying they will do different things. tom: economic data, retail sales in america, the theme in the 6:00 hour, the consumer. this is something we don't normally look at, the university of michigan -- ann arbor, blue.an, go, the expectations of inflation in five years. here it is, what we have done is

, 2ached this low in 2003 decades in the belief of america of where inflation is headed. there has been a real change, a mindset in america over a lower inflation regime. banksne: a lot of central are getting used to the lower inflation regime. this is what i am looking at. i thought i would do something different since it is friday. apple put $1 billion into uber.e i'm looking at the apple market value in white, also debt, formally known as google, is blue. you remember the shock news in january that google is bigger. in market value. going back to that crosspoint -- tom: i think the yellow circle looks like vancleave earrings. is that subliminal? they look a little bit like earrings with the dots. francine: the convergence

looking like bank leaf earrings -- like van cleef earrings. our guest host for the hour is robin niblett. we want to talk about apple. we will talk about brazil. today's the first time that we will hear from the new finance minister. we know who he is because we interviewed him when he was the central bank governor. it is striking when you look at the at there is not much diversity and this is the melting pot of the world. how difficult will it be to have the citizens behind them. robin: it depends on what you mean. there is a strong majority in backed thet impeachment. not supporters of the workers party, but looking at opinion polls, they have been in favor

of impeachment by majority. that doesn't mean it is easy to get people behind the government . people want a solution. they want growth. given this opportunity where brazil was growing economically and becoming more just socially. that is the magic sweet spot. now they are losing it. commodity growth collapses, infrastructure hasn't happened, oil prices have dropped, energy investment is not taking place -- people will not be looking at if they are white, old, and male , people will saying 10 they get things done? can they get us out of the petrobras driven crisis moment? that is my guess. francine: how difficult is it to turn around brazil in a manner that is quick enough to where you do not lose the support? robin: it will be very difficult to do it quickly. around the world,

if they feel a government has a plan and are working on it you can buy six months or a year. some of the problems will be long-term -- huge liabilities in the pensions. that makes the long-term budget -- samethis unsustainable. getting some of the corruption scandal out of the way and having professionals taking care of the economy, that can help. tom: the greater view of brazil, this is something that chatham house's stability, they talk about a new leader tilting to the right. this year, chatham house is seeing austria, the philippines, the campaign in the united states, and now brazil with a possible tilt to the right. when does the tipping point on the rightness of the many nations? robin: great questions. we just got a person elected as

the mayor of london, but i think that is a peculiar thing or london. i think the two to the right is a sense that the left is not providing answers in a moment of insecurity. the greater the economic insecurity, the less room the average public and voters feel they have to experiment with answers in the social level. the tilt to the right you're seeing that you picked out across a number of countries is a reflection of insecurity more broadly. that will not go anywhere soon. if you look at spain where we ave had this standoff with new election pushed off to june 26, the spanish prime minister has been waiting for the shoe to fall on his side. maybe the rise will drift off at that time. angela merkel who was looking week may be stabilizing. people are looking for professional answers. tom: i agree with the trends and nuances within each nation.

this is for zell's positions. brazil per capita gdp in . argentina is above them, a richer nation. up 46,000 states is per year per capita gdp. what is important is a search for growth in brazil. years are marked with a rising slope of per capita gdp. how do they get back to that? your: this is a classic -- chart is pointing out the middle economy trap. how do you move from developing economy to middle economy? that transition, which china is also trying to go through, is the most difficult the goods you need effective government and social services. people need to know that consumption has to be driven in a way that is sustainable.

that is incredibly difficult. my sense is that brazil is not there right now. china is trying to make that adjustment right now. argentina may have a better they did beforehand, but this is a global problem. the shift from developing to middle economy is one of the most challenging. tom: the nuances between roselle and chart -- between brazil and china, and an easier task in a smaller argentina. brian white will join us and we will look at the stumble in apple and the one billion position in china. ♪

francine: i am francine lacqua

in london. tom keene is in new york. let's get straight before the weekend to the bloomberg business flash. airbag recall keeps getting bigger. honda will recall 21 million vehicles equipped with takata airbags. they have deflator is that can deploy to forcefully. had negative interest rates longer than denmark. rates have been below zero for almost 4 years. currency reserves have been built up and sales of lawns have been halted. -- and the sales of bonds have been halted. lowhey're working like positive interest rates. we have not seen any lasting consequences of the interest rates so far. nejra: managers of danish

pensions and savings funds say the negative rates count for adjusting. for lessve more and go risky investments. apple is placing a bet on uber's rival in china. it is one of their biggest investments ever. a chance to forge alliances in the biggest single market outside of the u.s. francine: in asia the bank of kuroda,vernor, governor says there is room for easing policy further. we are joined by ryan. what governor grotta was trying to say is that it takes time for the effects of monetary policy to appear. we have seen a change in policy, or do we not think it is that important?

the key thing he said is that he does not need to wait to see the full impact that has already taken steps before he ask again. last time, last month, when they held policy steady, he explained it by saying that they have to wait and see how taking steps will do. he has put more risk into the market and added to the uncertainty. anything can happen as early as june. tom: how many arrows are there left in abenomics. over the weekend, will there be accounting of the arrows? brain: arrows, darts, really sharp pencils. i think what we will see is a lot of impact focused on the physical side. we have been talking -- on the fiscal side. his closest advisers are saying that they want to postpone the

increase of the sales tax. will mover. abe forward with that idea. also a stimulus package. we think that is what he will be offering. tom: do they make japanese helicopters? is that more than the first version of helicopter money? kuroda hasar, mr. said that he will not go there and will not think about it. what you're saying is right. it could be the model a of helicopter money. francine: how important is the outlook for fed policy determining what kuroda does next? brain: very important. we have the two fed presidents in boston overnight making hawkish comments to support the dollar today. that takes a lot of the pressure off of mr. kuroda. you can see with interest rates

projected to diverge further, that could be helpful to mr. kuroda. in japan, negative interest rates will probably get deeper before it is done. tom: can i quickly show japanese helicopters? we need to help brian fowler get ready for monday. this is great. helicopters over all of japan with fiscal policy. i want to help brian, francine. francine: do they have a special place where the money drops out of them? john: i'm looking into it now, because i want to catch it with a big net. francine: thank you, brian fowler from our tokyo bureau. when you look at abenomics, the problem is the yen is important, because you need companies not to be weighted down. to be able to pay more so

inflation picks up. will abenomics work? robin: it seems to be moving around the problem rather than addressing the problem. the problems are fundamental. it is the first country that has begun a steep decline on its asian curve, demographically. they refuse to accept any immigration. they're not contributing as much to the workforce. it is the country with the lowest proportion of gdp in the world. getting that an injection of new blood in terms of people. tinkering around the edges to make the economy lift itself up. they need a low yen to hope them with outside growth, but with energy headwinds holding new inl power plants, a decline

china, one of the main trading partners -- i think the euuctural reforms, tpp, and trade agreement, that is the third arrow. on theade percolating edge of the presidential debate. taxes are front and center. we will address that. let me look at data. equities, bonds, currencies, commodities. -10.res, thou futures, -84. a lower yield with critically curve flattened. you may not care, the pros do. the curve flattening in america. francine lacqua in london, tom keene in new york. a gorgeous friday in new york. bloomberg "surveillance." ♪

tom: features -11. i will call it quiet markets, but it is not a quiet debate in the united states on mr. trump and his taxes. tim o'brien knows those taxes better than anyone. of chathamin niblett house. in the united kingdom, the politicians have to show their tax returns? they will probably have to increasingly since david cameron was forced to do that

after the panama papers. we are headed in that direction in the u.k. tom: help me out, francine. is there an uproar in the u.k. about tax transparency? francine: a little bit. when you look at tax transparency, people in the u.k. cannot believe that trump is the main candidate for the republican party. people ask me, why does the republican party not split? why is there not a new party? he cannot even get the support of paul ryan. robin: he may get the support of paul ryan. it sounds like they were circling the wagon. the numbers in the presidential election look like trump could beat clinton. maybe he will moderate. he is a businessman.

can make statements like "i am change my opinion." he could flop again. francine: we will talk more about u.s. politics and the imf and madame lagarde giving a live news conference as we speak, weighing in on the brexit, saying that this is a risk for the world as a whole. there has been pushed back from pro brexit supporters. they're saying that a lot of world leaders have not weighed in and they do not see the risk. are as a madame lagarde says this is a risk for world growth. that is next. ♪

francine: i am francine lacqua in london. tom keene in new york. we are looking at central bank

monetary divergence. let's get to the bloomberg first .ord news with nejra cehic u.s. authorities are ramping up their part of the corruption investigation involving brazil's state owned oil company. the petrobras probe has already lead to arrests in brazil. the u.s. is looking into more than one dozen operations. it has been called the most secure financial messaging system and the world. cyber crooks have a tax it again. swiss is used by banks to move money around the world. unnamedck involved an bank. they stole $81 million from the central bank of bangladesh. germany is pressuring the international monetary fund over greece. germany wants the imf to accept assurances that the debt burden will be addressed in the future. the imf is under pressure to isept greek a sturdy that

-- greek austerity that is less than what they want. sailors were held by iran for 15 hours before being released. the executive commander of their unit has been relieved of the navy personnel and is likely to be disciplined. a federal judge in washington dealt a blow to obama's health care reform act. saying that it is unconstitutional. republicans argued that congress must appropriate the money. the judge put her ruling on hold pending an appeal. global news, 24 hours a day, powered by journalist's in more than 150 news bureaus around the world. tom: former bank of england policymakers were among 200 economists who signed a letter

in the london-based times opposing the united kingdom exit european union. we are joined by gentlemen doing the heavy lifting. tony yates is in economics at the university of birmingham. he is using every tool available, including his intellect. he is going back and forth on twitter. here is tony yates on twitter about the brexit debate. what i love about your 200 people is that it is an eclectic group. stephanie flanders, who often appears with us. alberto golomb with algeb ris. what has been the response to your 200 letter moment? prof. yates: overwhelming. we did not get anyone writing

bachelors, telling us they oppose the lesson. we did get some against letters in principle, and there was a debate over whether economists should poke their nose into public affairs. tom: what is your point versus gerard lion's in the times of london? think we need about one hour to go through all of that. tom: you have 30 seconds. it seems to us the best we could hope for with the norway-like deal where we have access as a single market. for that, we subject ourselves to free movement of labor and the cost of leaving the eu will be relatively small. however, one suspects that the leave count will what to infringe on free movement of labor and that will have to be paid for by reduced access to the single market. francine: madame lagarde is in

london giving a speech for article 4. she is talking a lot about the brexit. she is saying there's anxiety around the world about the brexit. that politics is not the job of the imf, but there is a significant downside risk. the politics and the economy gets confused. a lot of people say mark carney is weighing in on the debate, but how much of this is a question? hugerexit will have implications, economically, on the future of this country. robin: the independent estimates, at best you will get hit in the first year or two, and it could go up to 6% to 2030. i am not an economist. my impression is when you get the majority of people saying

something to know what they're talking about, i listen to the majority. it is the timing. this is not happening in a vacuum. it is happening when the european economy is a mess, greece is on the ropes, china is slowing down, presidential candidate trump and clinton -- there are moments in the economy where this shift -- a major top taking ac power is choice that will hit its economic prospects. at the moment, it is dangerous. i'm not surprised that mark carney or christine lagarde would reference it. francine: the problem, sometimes, is that when you look at figures and charts, you can let them say what you want. this is something that the ers have been arguing. what is the strongest piece of

advice for an economist looking at the brexit? trade, value loss, st irling? we cannot be very precise about how beneficial the single market has been, but we can be confident we have benefited from it a lot. the economic case remaining. francine: will it be difficult to do trade deals? it is unclear. you have arguments on both sides over whether how much this would hit gdp, right? negotiate trade deals you are in limbo for number of years. prof. yates: the uncertainty will way on the economy as these things way out. -- weight o out. it is not my expertise. , which has notnt

been made clear. the uncertainty will weight anonymously -- will weigh enormous lay on the economy. fromhas britain benefited brussels? ando 15 years of stumbling now regulation -- and mal regualtion by brussels? prof. yates: my feeling is that ffsets other disappointments one might have about setting up a more liberal environment for business in the eu. tom: can the success of pushing lead to less austerity within the united kingdom? professor blanche flower has been heated about too much austerity, that austerity in the united kingdom. we do presume there would you

less if the united kingdom stays within the eu sphere? that is hard to tell. , and mark carney's view, we will have a shock to demand that will put a strain on fiscal policy. i would hope the government responds to that by loosening. they have been really tough on austerity. the worry is that they would not turn on the taps, which they would need to do. particularly because interest rates are very close to a natural flow. tom: congratulations on the impact of your 200 signing letter and on generating the debate. i think it is great to see them go back-and-forth on twitter. very productive. a report today, macy's and company really difficult.

we will look at the state of the american consumer. it is confusing story. ♪

francine: welcome back. francine lacqua in london. .om keene in new york in america, jcpenney reports later today. it has been a tough week for retailers. including macy's. michael mckee joins us. you are benchmarking the retailers to tell us what it tells us about the u.s. economy. about interestng rates, this will be more important for wall street dan for the fed. here is why.

we have experienced a tectonic shift over how we shop. it is reflected in the united states in the last decade that we have started to spend more on experiences than stuff. clothing,line is shoes, other stuff. the yellow line is experiences and services spend ring. and services spending. the fed is looking at that and saying we can understand why retailers are not doing well, but what is the real story about what consumers are doing. we have to wait for the index at the end of the month. francine: does it mean we have ?o look at things differently like the fed is trying to figure out what really makes us see strength in the economy? michael: there's been a shift in the way we shop, save, the way we do a lot of things in this economy. that will be tough for the fed to figure out.

of a percent because we are spending more on cars and gasoline. they want to see if america is spending more on services. tom: i just got my invoice from credit debit recapture. services, that includes my accounting bill? oneael: it includes category of services that is eating and drinking establishments. we will see if you did your part. tom: i've been trying to keep that up like crazy. i am trying. you and i are wedded to manhattan. francine is wedded to london. on that chart, is it a big city, the rest of america kind of axis? michael: it is a generational thing. you might go to nordstrom, but your daughter will not.

she will go to h&m or zara. she will take that extra money and go to the nail salon or somewhere else to spend on an experience. that has been a major change. over the last whole decade, this has happened. tom: my kids have never seen h&m. she is doing her bid for the u.s. economy. a fascinating chart that brings back what we do on a day-to-day basis, going back to these macro economic troubles. how do you view a chart like that? robin: for me, it tells me there is a change in the way people are consuming in a technology intensive society. as the father of two daughters, getting a car license is difficult.

wide why want a car? why would i want a car? you get apps. you stream your music, you done no -- you do not even own records or cds. a shiftthere's away, which might be good for the planet in terms of resources . getting more out of less. that is a good vision for the future. i look at that chart and think it is good. i think about the pew study about the american families in metropolitan areas are less well off today than they were 15 years ago and it worries me. who is making stuff? where are the jobs? tom: there was a pew research study of different metropolitan areas. the inequality is not only there

, it is pervasive and growing. you at chatham house see a policy prescription that can reverse inequality? that theren't think is a single policy prescription. like everything in life today, it is complicated. the answers are complicated and the questions have to be complicated as well. you end up with education. you end up with probably more effective urbanization. you think of the taxation -- and we had this discussion earlier about taxation. corporate taxation. the fact that money is not sloshed around to where it has an immediate social effect. it is a multilayer set of actions. we can not carry on the way that we are or populism will rise more. tom: coming up, michael mckee and i will be on bloomberg radio

speaking with one of our most popular guests. been deadhen he has on. has nailedte of rich the slowdown in retail. ♪

tom: good morning. bloomberg "surveillance." francine lacqua in london. tom keene in new york. madame lagarde is also in london. nejra: the speculation that a buyer may need to sell assets if its form and with sent out. it would supply bond chemicals. 43y have a market value of billion dollars. one analyst says that bayer are may sell its business to fund a takeover. more evidence of the u.s. department industry that is in a deep slump. nordstrom has cut its forecast to be less than expected. that is one day after macy's gave a similarly bleak forecast. there is a concern that consumers are spending less on

clothing and department store staples. mark zuckerberg will investigate reportshow the website news. he will meet with conservative leaders. the come any is embroiled in controversy over whether it suppresses conservative viewpoints in its trending feature. thank you. we just had a lot of comments from christine lagarde talking about article 4. in assessment of the economy the u.k.. she has been warning that a brexit could cost the u.k. a lot . she is talking about a possible recession. she says that a u.k. brexit will likely be negative and severe. these are heavy words. let's get the robin niblett. these are something -- the last time that madame lagarde was in london in december is something she said clearly. she said a brexit vote could

trigger so much uncertainty we don't know but the endgame is. she feels that this is huge for the world economy. that this could be systemic. robin: i was noting that the timing of the brexit, if it were to happen -- and it would be a good two-year period where that would be negotiated out -- is badly timed. a slowdown in china, uncertainty of where the united states will go in terms of being a leader in the open market economy and world, and the eurozone in a difficult position. the u.k. is the fifth largest economy in the world. you can see why she, like mark carney, with what to highlight this fragile moment of economic growth the risk of brexit. we have heard from a number of economists, and even those arguing that britain should leave, are recognizing there will be disruption. some say it will be good and shakeup europe. the problem is the rest of the

economy could catch it. leaders: these are well that are in the remain campaign. minds ifmpact voter's you have wealth leaders saying we want you to stay? robin: it is complicated. in the end this is an emotional debate in the u.k. i think the economic argument is being dominated by those arguing that britain should remain. tom had the comment about regulations being imposed by brussels. says the u.k. is the second less regulated country in the world, after the netherlands. u.k. growth is up, unemployment is down, it is hard to see what the economic problem is. what is happening is a settling down to the issue of immigration. immigration is a clear area where the u.k. government does not have full control over the

movement of labor from the rest of the eu. this is something you cannot fix with economic argument. foreign leaders cannot impact that call. tom: i think you get to the heart of the matter. is it economic, which i doubt, or political, far more. i cannot remember this quote on a friday, but the issue is that it is a political debate wrapped around the movement of the people. what should be the response from brussels as we stagger to the end of june? andn: i think brussels, other eu governments in the eu commission, i imagine will try to make sure nothing happens between now and then that could act as an additional spur to brexit. the big worry is whether there is anew push of immigration out of turkey.

if that deal were to collapse, even though britain is outside those people cannot come to the u.k., the loss of control in the rest of the eu over immigration could the enough to tip the immigration debate to the top. tom: quickly, suggesting opposing these many opinions, including madame lagarde. if england separated, they would be forced to look out more globally. do you buy that idea? robin: i do not. germany and the netherlands are to the biggest exporters, one in gross numbers and the other in per capita, in the world. they are in the eu. i do not see why britain cannot look out globally and be in the eu. they have tried to go global. exports to china have doubled in the u.k.. they have remained flat in other emerging economies.

they are not making the transition through to the middle economy status. the idea that the eu is still the u.k.'s biggest market, the biggest trade deal for the u.k. is the services market deal with the eu. that is where you get the biggest growth. withit is always wonderful chatham house. in the next hour, we will coalesce with what we know about economics investment and international relations with , the chiefn economist with oppenheimerfunds. stay with us. bloomberg "surveillance." ♪

tom: apple checks uber. they will invest $1 million in

didi. tim cook wants to learn more about chinese markets. on its backerica is after macy's and company, including nordstrom's. the state of the american consumer. complex taxs a return. mr. romney says it is simple, show us your 1040. i am francine lacqua in new york. she is tom keene in london. they are me, it is friday. -- they'll meet out, it is friday. francine: the virgins, when we look at what governor kuroda said and 2 officials. certainly, the carney press conference yesterday.

it was truly extraordinary. the tension over recession. francine: we have very strong words from madame lagarde in london at assessing the u.k. at economy saying that brexit is not only a risk for the u.k., it is a risk for the whole of the world. for more on brexit let's go to nejra cehic. a weekthe imf has capped of warnings about the u.k. staying in the european union. managing director christine lagarde says the consequences of a brexit range from bad to very, very bad. >> we're not doing it out of politics, this is not the job of the imf. we are doing it because it is a significant downside risk. it is not just a domestic issue. it is a big domestic issue for many of you, but it is an international issue. germany's economy grew at the fastest rate in two years.

gdp rose 7/10 of a percent, beating estimates. domestic spending offset a weakness in exports. record low unemployment in germany boosted consumer spending. the european union's naval operation to stop people smugglers in the mediterranean is not working. lawmakers in the house of lords says efforts to disrupt the smuggling business are falling short. the eu is succeeding in rescuing refugees on the high seas. has militant group suffered a major blow. the iranian backed organization says a senior commander has been killed. of thein charge hezbollah military operations in syria. according to a lebanese report he was killed by an israeli airstrike. this may be one of china's biggest online leaks. personal information on dozens of chinese communist business leaks onave been

twitter. among them is jack ma. global news, 24-hours a day, powered by our 2400 journalists, in 150 news bureaus around the world. i am nejra cehic. equities, bonds, currencies, commodities, up negative eight. yields, we will talk about that. 1.73. back over to the next screen, the vix showing a little bit of tension. 15.12. the german two-year, getting to negative lows. zero point 51 with curve flattening in the united states. a big deal to go from 102 to 97 point five. a lower 10-year yield. deal.ne: that is a huge this is the picture from the european markets. the area growth is revised down slightly despite strength we saw in germany. , 108.8 one.

this will be a problem going forward as yen continues to strengthen. gold, for good measure, it seems we are risk-off. that is impacting australia. you can see the aussie dollar. michigan out today, the university of michigan conference data. the expectation of inflation, 20-years, we go over and we rolled over inflation expectation, 2.6%. significantly lower than the low of 2003. this is a rollover in animal spirit we have seen nationwide. francine: my terminal from the in white, last hour, these are the 2016 fed hike odds. the percentage is on the left. the percentage has gone down

from three weeks ago. yen drop inate, the for the second week as people believe there will be divergence. do you like that chart? tom: it shows the shifting tides. it goes back to the nefarious dot plot. he has the dot plot tattooed on his left arm. with webman oppenheimerfunds. they're terrific international exposure. we always love to have jerry webman, particularly on a friday. i want to introduce the single best chart. this is consumption to gdp. retail spirit. a lot of people thought five years or 10 years ago, finally we get less consumption in america. we have moved up to 69%. up we go.

over two thirds of our economy is consumption. is that good or bad? things we do the differently is government spending on health care flows through consumption. it looks higher than it might be based on you and me going to the barbershop or -- i guess we are never going to be department store again, but it is high. of our economy is health care. we see that through the conception number in gdp. jerry: that is one reason why the government section of gdp looks smaller. is pushed into consumption. i do not know how much of that increase you could explain by the increase in health care spending. and not just us -- tom: francine? francine: what does that mean for interest rates? when you look at fed officials

coming in and saying that the markets are not pricing correctly and we should be more hawkish, the market expectations for a rate hike is not moving anywhere. is that because we need to focus on what janet yellen thinks? the ot that matters is hers? jerry: her leadership is the most important in respect to the fed. if the interest rates will go up, you have to seek more nominal growth, more real growth and more inflation. where either of those will come from in the near future, where we will see better numbers this year on either issue, i have trouble telling you where that will come from. we can talk about the maturing of the millennials and there may there,me boost in but if the fed is looking for higher nominal growth as a reason to do what they really want to do, to normalize

monetary policy, i don't know that the numbers will cooperate in the near future. a third: do they have mandate looking at financial stability globally? in their is not legislation, but every central bank has got to think about that they are responsible for the integrity of the financial system. they have to focus on that. they are a central bank. that is why we created the fed a century ago, because of financial instability. sure, that is there. let's walk through 2015 dot plot. the red line will go further away from where the fed is, the green line. that is where we are now. is the market going to come up to the fed, or is the fed going to have to capitulate down? jerry: we only have history to tell us what has happened.

what has happened is that the market has come back very much -- what has happened is the fed has come back to the market. the fed has overestimated how fast the economy can grow. maybe that is over belief in their policy, but my guess is the fed dot plot comes down to the market. tom: the curve's flattening in the united states, which is somewhat of a characteristic that would lead the fed to come down to where the market vigilantes are. we will continue this discussion e.d five into divergenc what am i going to buy this weekend from apple? , china,ite on tim cook and your next apple toy. ♪

francine: i am francine lacqua in london. tom keene is in new york. let's get to the bloomberg business flash. keeps the airbag recall getting bigger. honda will recall 21 million vehicles equipped with takata airbags which have deflators that can inflate too quickly. in denmark, rates have been below 04 4 years. bonds werenish halted. we >> talked to the head of the central bank. negative interest rates are working like very low positive interest rates. we have not seen any large

negative consequences of negative interest rates so far. nejra: managers of danish say they ares counterproductive. people save more to protect future purchasing power and go for less risky investments. apple placing a bet on uber's rival in china, didi. it is one of the biggest investments in software and services. it gives apple a chance to forge alliances in the biggest single market outside the u.s. francine: thank you. we now talk productivity and we go to new york. this is really just a ploy to get tom king to admit and capitulate that europeans may you more productive in certain cases than the u.s. we brought in the big guns. on his day off. a european working on a day off.

get a hard time because we have more holiday, but we are not less productive. not at all, but there is difference between productivity and competitiveness. when you think of the french economy, 35 hours and high taxes, it is not an issue of productivity. that is how much you produce each hour you work. of that, european economies are very high. perhaps because we work fewer hours. tom: i do not disagree. the french have arguably the highest productivity in the world. they made a decision out of world war ii to work less hours. how much do you observe the 35 hour work week in paris. a lot of people have told me that it is a fiction. gg: the average french worker gets 41 hours a week.

it is fiction. in the private sector it is fiction. for those who work on their own, if you want to see hard workers walk down a french market street of the them setting bakeries at 5 a.m. and closing at 7:00 at night. hospitals are quite strict and that is a mess in terms of scheduling. overall, it is a myth. tom: capital dynamics and later. -- and labor dynamics. rance, are they leading in capital? residual total factor productivity. you give people more machinery, more productivity, more training, more label productivity. then you have an x y factor that is more than the sum of its part. tom: it is both eyes, that is

what it is. we were looking at productivity in the u.s. compared to france and the u.k.. his productivity in the u.s., it has not been this low since 1993. what is going on in the u.s.? jerry: i'm not sure that there is a great answer. we ared be that measuring output in properly. i imagine that is something that people are hoping for. so much of what we put as output is electrons moving around rather than goods crossing through the cash register at the department store, or heavy machinery moving on the highways. we are not measuring output effectively. that we have been too slow to invest in capital, so we have not been doing that one piece of productivity improvement, getting people better goods, machinery, and

software to work with. francine: we have to remind our global audience, it is easy to beat up on the french. a lot of the decrees put in place by the more socialist people in government, it is not largely been changed by progressive finance minister. greg: the 35 hours has been loosening, but not all the way. there was a step back. there were a lot of proposals. after protests, it was quite watered down. sidenk there is a negative to high french productivity. fewer people work because of high unemployment. if you check in in a hotel, the guy checking you in probably has a university degree. he should be in a better job than that. a lot of people are

overqualified for their jobs because of high unemployment. to, where there wheregic -- we talk to, there is tragedy. in paris, day-to-day is very visible change? greg: i don't see it. every now and then i see an article of how terrorism is down. --you go by tourist sites everyone is in restaurants and bars. it is one of the most visited cities in the world. a 10% decline injuries and in paris is like a 10% decline in rain in seattle. in brazil, they will build a train as part of the olympic bid. come back from vacation

more often. michael mckee is using vacation days. francine, get in line. we will come back on a friday and talk the american consumer with jerry webman. there is the data. the brazilian real, 3.45. historic headlines of a weaker brazilian real. worldwide, this is bloomberg "surveillance." ♪

tom: washington, the debate has been the last couple of weeks. we went to the sunday talk shows. tonight, 5:00 p.m. with "all due respect." what a week for drama in our crazy presidential politics. a beautiful article on donald trump. he drives the story forward. mr. trump's taxes. tim o'brien, said that mr. trump apparently boosted his income in hisdocuments by conflating various businesses' revenue with his personal income. trump did not- respond to the assessment, but can cleared up by releasing his tax returns. a brilliant column in "the new

york times" on the minutia of the tax returns. transparency is what this is all about. should it become a normal, routine thing that you show your tax return? expected that from our political leaders. -- we havee expected that. we have a legitimate right to know that income is reported accurately and taxes paid appropriately. tom: mr. o'brien wrote a book about mr. trump and all of the shenanigans, pro and con. killing himself trying to be fair. bankruptcy asused a tool, which is a unique feature in our american economics. has donald trump cleared markets? not know his particular financing arrangements in detail. i know having been associated with a high-yield markets that there has been troubles in bonds

associated with trump businesses. bankruptcy is a useful thing. if japanese banks had cleared their books in the 1990's -- it is a good feature. we allow people to fail and start to succeed again. it is another thing. it is like the elements of the tax code, use it, but do not abuse it. francine: when we talk about inequality, and that is an economic problem, should we be more up front with everyone's tax returns? would this help or hinder the inequality in the states? jerry: i'm not sure it would help anyone's income to know what the three of us were making . i do not know that that would help anyone articulately. the issue is, could we get some of the inefficiencies and distortions out of the tax code

over time and make it more clear how to make money i making goods wants toces someone use, rather than finding things that are advantages in how we pay taxes. tom: the debate will not disappear. we will continue at 5:00 p.m. tonight looking forward to their take on this. yesterday, they were heated on this debate of the republican candidate and his tax returns. 5:00 p.m. tonight with "all due respect" getting you ready for your weekend. this is bloomberg "surveillance." ♪

francine: i am francine lacqua in london. let's get to the bloomberg first word news. nejra: it has been called the

most secure financial messaging system in the world. it is a system used to transfer money around the world. it has become the target for cyber crooks. this involves and on that name to bank. they used it to steal from the .entral bank of bangladesh germany pressuring the international monetary fund over greece. the imf to accept insurance is that the greece debt burden will be addressed in the future if needed. under pressure to accept degrees austerity that is less specific than the organization wants. this has to do with degrees getting the next part of its bailout package. thatommander of 10 sailors were captured when their boat drifted into iranian waters has then fired. they were held for 15 hours per or being released. the commander has been relieved of his duty. to navy personnel are likely

be disciplined. a blow to president obama's health care reform. the plan to reduce out-of-pocket costs for people who by obamacare is unconstitutional. it has been argued that congress must appropriate the money. the judge's ruling is on hold up -- on hold pending a repeal. nigeria, morocco, and nigeria are countries of safe origin. the majority of refugees who injured germany last year were from syria. only a small number of refugees from north africa have received asylum. global news, 24-hours a day, powered by our 2400 journalists, in 150 news bureaus around the world. i am nejra cehic. tom: let's go right to the bloomberg before we bring in brian white. this is apple.

a little less. a recent rollover. this is all of the product cycles. they are going to go out of business. they are going to go out of business. extreme doom and gloom. we welcome brian white. itan: it is definitely a buy looks like the profit cycle will bottom in the june quarter. we have a company with 233 billion in cash and lots of opportunity. tom: is the stock goes down, is this a good time to be playing cash to shareholders. to bullying cash shareholders like you are deploying cash to china. brian: they have a $250 billion cash employment strategy increased from april. what i would like to see is a bigger hike in their dividends. i think if they could get into a 3% to 3.5% yield, that would be attractive for investors.

francine: apple is saying they want to back didi, the biggest competitor to uber and china with $1 billion. when we see more of this funding for small rivals to ubr or other american technologies? brian: it makes sense on a couple of fronts. it allows apple paid to spread throughout china. it builds goodwill with the chinese government. it is an interesting area. there is talk about apple being involved in autonomous cars. inc. of all the cash apple has overseas that they cannot ringback to the u.s., including china since they generated $50 billion in revenue last year. dividends,ou want but you are saying this is a good deal. would you rather apple invest in more deals like that that can bring you a bigger share price rather than giving back to you now in dividends?

brian: i think they can do both. they announced a $250 billion capital deployment strategy. that is through 2018. part of that is dividend, part of that is sheer buyback. a higher dividend yield would be very attractive. tom: assad valuation, i believe it was similar -- i saw valuation, i believe it was similar businesses, how is the ecosystem. everyone is saying it looks like the iphone 7 has a lip on the lens. value the ecosystem first. becoming aworld is computer. it started with the music player that went into the smartphone. then the ipad came out. think about what is happening the watches, the car, television. we do have an ecosystem of icloup, apple pay, apple music.

that is very powerful. am i right that these guys are so confident that they will destroy itunes. streaming is winning. is that right? they deny that they will destroy itunes. they are offering apple music. they will not do away with paid music. they are offering apple music and are pushing aggressively to stream. hitting a point. the ecosystem gets no value. at the end of the day, no one will be able to catch up and offer this seamless service. i was in china and met with one oam's inading china the smartphone market. he was a no one has a brand like apple. no one has a loyal customer base like apple. it is tough to compete in the android ecosystem, because we are all offering the same thing.

francine: in some cases, national pride takes over and you by the national phone. i want to show you the market valuation of apple versus alphabet, formally google. it has taken over. morepple is briefly valuable -- sorry. why all was briefly more valuable in february. it will likely do the same again . is this winner takes all? away from market cap, who will win in driverless cars? apple or google? brian: i do not think there will has to be one winner. there will be a lot of companies that participate. apple has an ecosystem that says they can go from a smart phone a driverless car. google is offering with the search engine, with an operating system for the smartphone business, but not really a smartphone vendor. apple -- everything is becoming

a computer -- they have a lot of leverage with this it go system and their balance sheet. francine: what will the ecosystem look like? driverless cars? brian: it will not only be driverless cars. and one contact involved getting involved in robotics. virtual reality. i still believe in the television. tom: in the doom and gloom that it out there now, the world is coming to an end, do you see large and erosion? i've not observed, maybe 150 beeps here and there, but that is not erosion? brian: i do not expect it. apple has a branch, they can sell these products at the price point they want. sells a brand, they can these products at the price they want. this year we have down 70 billion, to 10 billion to 15 billion.

last year was 70 billion. eps is similar to free cash flow. it has grown 30% per year. tom: it has become part of our society. maybe it is like general motors in the 1930's. it is an example of our innovation that we have a global reach. become, we are part of the ecosystem we have been hearing about. they cannot figure out -- look at what is happening to public opinion polling. no more landmines. everyone has a -- no more land lines. everyone has a phone in their pocket. count phones and give you the results on wednesday. we appreciate the results. an update on his enthusiasm in the extreme gloom and dam. on bloomberg radio, on an ugly week for retail.

a view forward. can retail get back? ♪

francine: i am francine lacqua in london. tom keene in new york. we're looking at markets, monetary policy. let's get to the bloomberg business flash. nejra: the speculation that bayer may need to sell assets if it goes ahead with its bid for monsanto. it would create the largest supplier of seed and farm chemicals. it allows a value of $43 billion. they are good sell its animal health business and plastics to the world'sver area

largest energy companies are borrowing record amounts of money to cope with a collapse. they have the lowest debt costs in a year to make it easier. exxon mobil, shell, and others have sold $40 billion in bonds. feeling the impact of the emissions cheating scandal. it is at its lowest level in five years. havend fiat chrysler increased in european sales. francine: madame lagarde giving a news conference and our half ago. she said we are not talking about the brexit because it is politics. it is not the job of the imf. they are concerned about the downside risks if the u.k. leaves the eu. let's get to oppenheim or funds

chief economist, jerry webman. we talk about this day in and day out. some are saying there is a systemic risk. a lot of people in the u.k. refute that argument. tiphere a concern that we into a world recession if the brexit happens and we are not prepared? jerry: i do not think the u.s. average investor is thinking about the brexit at all. thinkingo have our stop when we get to the edge of our continent. it is underrecognized in the u.s. as a threat. there is complacency. there is a tendency to our own political theater that is going on. it is possible that as far as u.s. investors are concerned, it is not priced in. the disruption it might create is not priced into the way we are buying and selling markets right now. francine: earlier on we spoke to

the irish prime minister. he believes that a post brexit u.k. could feel a chill. >> ireland's point of view, we want very clearly that britain should remain a member of the european union. that includes across the irish impact on northern ireland. that we have a common travel area since the early 1920's, and the fact that europe is much stronger with a strong britain. the problem with trade deals is that they are essential to economics of a country. dealsch do you like trade and are concerned it might not get through? jerry: i worry they have stopped being boring. that they have become political lash points in ways that are misunderstood.

it is hard for anyone who studies economics to think that free trade is not a general good for anyone. the failure of some countries, including the u.s., to deal with the individual impact has made this a political issue. my fear is that trade deals are becoming more of a flash point. tom: i want to show a balance sheet and an income statement. bring up the debt chart. we showed this yesterday. t in the in net deb united kingdom. there is the idea of a forest austerity to get back to normal. on the bloomberg, we interviewed a denmark banker. this looks a lot like italy. this is nominal gdp. an animal spirit basis, it ain't working.

that is the u.k.'s big fear. jerry: i would love to talk about the negative interest rate story. you can see, academically, if a little bit is good, a lot is better. if a little is good, less than nothing is better. how do you tax banks by giving them negative deposit rate whens you want them to rebuild capital? tom: it looks like italy, but it is not. jump in with the rollover in denmark nominal gdp. francine: i have lived in the u.k. and in other countries. i have not been to italy. do not see is if you negative rates breaking, what do you do? there nothing left apart from helicopter money. 1981, this has been the air of monetary policy is

the solution to all problems. the university of chicago, the old joke, i did not hear the question professor friedman, but the answer is control monetary policy. that has been an answer for 40 years. it may have done as much as it .an do monetary policy can do damage. it may have done as much good as it can do. it does not mean that i know what we are supposed to do. tom: department stores fall into a slump. we will look at the american consumer. retail sales coming up. we will talk to jerry webman of oppenheimerfunds about the spirit of the american consumer with our single best chart. the data board, we do that across all assets, equities, bonds, currencies. the german two-year yield, negative interest rates. temperedive lows, but

to a stronger dollar through the week. this is bloomberg "surveillance." ♪

tom: foreign exchange, the dollar is stronger.

you do not want to oversell that. the yen 109 earlier. 108.88. the brazilian real, on the good news of impeachment, down to 3.45. figures over the last 18 hours with those historic headlines. rahercular thanks to john frei e with his perspective yesterday. francine: he has been out front with the coverage. next is bloomberg with david westin and jonathan ferro. what you have on the show? david: it is all about the u.s. consumer. we will look at retail sales numbers. we will talk about those with j.p. morgan's chief u.s. economist. we will talk about deals. acquisitions started slowly. we will be joined to tell us where they are and what might be holding back the united states.

is well known for being successful in shortselling. we will talk to him about pacific equities he is short on. tom: let's get to the single best chart. let's take a bigger look. the backdrop is ugly retail reports. is across all of retail america. this is consumption to gdp. you say much of the growth has been net growth in health care. at the same time, the american consumer is not delivering. is it just about income growth? jerry: you said animal spirit several times. it is about lack of confidence, some of it is income growth. that is distorted because our age profile is becoming younger with millennials coming in. they're not buying the same stuff. it is a shift in people, in pace , on what people are willing to

spend on. tom: part of this is barriers to entry. the airline business trade to and beadults responsible. i do not see that in retail. analysts sit with your in oppenheimerfunds, are we over stored? resultshe earnings suggest that yes we are. we are not selling to the extent that we have the capital, the buildings, the bricks and mortar to sell. tom: the idea of the gap and quarter -- this .s not to percent to 3% misses they are big. francine: a goes back to the way that we shop. the way we look at things. the way we need to measure world growth and the world economy. this is something that central banks have to deal with on a daily basis.

when you look at this new dynamic, we talk about secular stagnation, we have not talked about china. can china take the consumer space that the u.s. consumer has had until now? jerry: it may not take the full space, but they have four times the number of people. to produce that much demand in the world, they can do it with less. i think that is the biggest question of the next five to 10 years. how much the chinese consumer can become a driver of global demand for all kinds of goods and services. not just china, but what china drags with it, or what happens independently in india. we have to look at the possibility of a workforce of growing and the possibility of a lot of increase in productivity. not only frenchman working longer hours. about whetheralk

the fed will hike in june, september, what happens next -- it is short-term. big risk, it is if the chinese consumer can adapt. to.he prc will allow it are you confident we will have the shift? it may not be smooth, but we will get there? jerry: i'm not confident, but i am optimistic. it has been a mistake to underestimate the chinese economy that we have made for 30 years. the shift is occurring. services are larger than manufacturing. retail sales have held up reasonably well. we are seeing a diffusion of 21st century retailing. whether it is the e-commerce game and the like, using electrons rather than brick-and-mortar. i feel optimistic on the but i

will not use the word "confident." they have a long way to go. francine: thank you for joining us. oppenheimerfunds' chief economist, jerry webman. bloomberg is next. chaseave the j.p. morgan chief economist at 6:00 a.m. in new york, 11:00 in london. the world financial markets cannot shake off a sense of gloom. the msci all country world index saw up all of the gains we in the last five-days. we talk about monetary policy divergence next. we have sun in london. happy weekend to those breaking off early in europe. ♪

>> tim cook puts $1 billion biggest rival in china. >> a decrease in u.k. gdp would

be contagious. >> the chances of more rate hikes ahead. david w.: welcome to go bang -- "bloomberg go." i'm david westin. >> you had some great conversations. david w.: we had terrific conversations with major investors. we are going to hear from jim chain us. >> what was the tone of the conference. some real skepticism about equities. a lot of pro trumps sentiment. >>